MFA Submits Letter to IRS on Proposed Rules on Dividend Equivalent Payments

April 06, 2012

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From: MFA, Richard Baker

To:

Internal Revenue Service

MFA submitted a comment letter to the Internal Revenue Service on the IRS proposed rules under Section 871(m) of the Tax Code. In our letter, we encouraged IRS to amend the proposal to provide more certainty for market participants while also addressing the concerns about inappropriate tax avoidance the HIRE Act and the proposed rules are intended to address. Specifically, we encouraged the IRS to, among other things: (1) extend the period of the temporary regulations to avoid unnecessary market disruption to existing contracts; (2) narrow the scope of contracts covered by the rule to address transactions that raise inappropriate tax avoidance concerns, while avoiding unintended consequences on the equity-linked derivatives market; (3) develop an in connection with standard as part of the restrictions on derivative counterparties trading the underlying security in the market; (4) eliminate the so-called 90-day rule, which would create significant uncertainty and unduly inhibit many legitimate short-term trading strategies; and (5) provide clarification on a number of issues to reduce uncertainty in implementation.

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